The great property sell-off by landlords has continued across Great Britain this year, in particular in Scotland, where the buy-to-let bubble appears to have burst.
As the property website Rightmove reported that new seller asking prices dropped by 1.7% or £6,088 last month to an average of £362,143, Hamptons revealed that landlords were on target to have bought the fewest number of homes since 2010 – once the period of the first Covid lockdown is discounted from the data.
The upmarket estate agent said that while the 2023 sell-off had been less pronounced than over the last two years, it was continuing the trend started in 2021.
The share of homes sold by landlords in Great Britain fell from 15.7% in 2022 to 14% so far this year. Investors have bought about 11.2% of all the homes put up for sale this year, compared with the 15.7% bought in 2015.
Hamptons said individual landlords would have sold 294,300 more homes than they had bought since 2016, more than the total number of homes in either Manchester or Cornwall.
Changes to way buy-to-let incomes are taxed, massively higher mortgage costs that have followed 14 consecutive interest rate rises, and changes to house emissions regulations have all played their part in weakening the attraction of buy to let as an investment.
From 2028, landlord-owned properties will have to have an energy performance certificate (EPC) rating of C or better. It is thought that thousands of homes will require expensive upgrades if they are to comply, which has led some landlords to decide to sell up now.
The estate agency said it believed that 10%-20% of landlords who have been forced to remortgage recently were now losing money on their investment. Overall there were 43% fewer homes available for tenants to rent in the first 10 months of this year compared with the same period in 2015, it said.
Scotland has seen the biggest sell-off this year. Landlords made up a record 12% of all sellers in Scotland so far in 2023, up from 10% in 2022. Tighter rules and regulations, predominantly in the form of rent caps, have pushed landlord purchases down to a record low of 6%, it said.
Aneisha Beveridge, head of research at Hamptons, said the company was predicting that the lack of properties to rent would push rents up by 25% by the end of 2026.
“Strong rental growth is softening the blow {for landlords], but they’re also drawing on their equity and cash reserves to see them through. Portfolio investors – who tend to be more highly leveraged – are juggling their assets by selling one or two properties to reduce their mortgage debt on the rest of their portfolio, rather than selling up entirely.
“The real supply issue facing the private rented sector hasn’t just been caused by landlords selling up, but also because there’s been little appetite among investors to purchase new buy to lets over the last few years. This has reduced the number of homes available to rent which is fuelling rental growth.”
One factor influencing landlords has been the fact that the property price boom is over. Rightmove said on Monday that new seller asking prices had dropped by 1.7% to £362,143 in November, as Christmas approached and sellers “continue to adopt more pricing realism to attract a buyer”.
It said average asking prices now stood at 3% below May’s peak. Lloyds bank recently said it predicted that UK house prices would continue to slide this year and next, and would not start to recover until 2025.
Last week the estate agency Savills said it thought average UK house prices would fall by 3% in 2024, after a 4% drop this year.
Tom Bill, head of UK residential research at Knight Frank, said: “The story of this slowdown is a double-digit fall in transactions rather than a dramatic price correction, which has been kept in check by weak supply.
“Higher rates, the prospect of a general election, overseas conflict and ambiguity over when the bank rate will peak are all sapping sentiment. We expect prices and sales volumes to bottom out next year as the economic backdrop stabilises.”
